Unfortunately, regular savings accounts currently pay such a low interest rate that many savers seek out good alternatives in order to increase earnings.
There are many ways to save, but some are riskier than others.
It is natural to want to protect your savings and also to get the best return for entrusting your money to a financial institution.
As long as the economic climate keeps interest rates low, this will be a challenge.
There are many ways to save money beyond having a traditional savings account at a bank.
Some options are designed to be used long-term for retirement purposes, while others are very flexible and allow you no-penalty access to your money when needed.
Depending on what kind of access you’ll want for the money you are intending on saving, you’ll want to investigate several different options and find the best ways to save money that work for you.
Most savers want to have high interest rates, flexibility, no penalties for early withdrawal and safety for their investment.
The financial industry has all of the above readily available right now.
All you need to do is decide which one is the best option to choose.
In addition to using traditional savings accounts, there are
5 Best Ways to Save Money:
● Alternative Savings Accounts
Protected savings with higher rates; money is tied up longer and there may or may not be a penalty for early withdrawal
1. CDs – variable lengths of time until maturity
2. IRAs – designed to only be used after retirement
● Pay Off Credit Debt
Reduce high interest debt as a form of saving, no risk, all benefit
● P2P Lending Clubs
You reap higher interest payments but also higher risk with people-to-people loans that your investments are used to make, no protection
● Alternative Accounts that Earn Interest
1. Money Market Accounts with high yields – you can write checks, not very high interest
2. Reward Checking – High Yield Checking Accounts – better than CD rates – may have requirement to use credit card
3. Online savings accounts that are FDIC protected competitive rates, ACH transfers to other accounts, multiple accounts.
● Bonds, Treasury Bills, Notes
Protected against loss or forfeiture; lower interest rates but longer terms; less flexible
There are risks and benefits to each of the above financial tools.
1) If you invest savings money with Federal credit unions, local community banks and online banking companies, you have the benefit of safety and protection from risk of losing that investment just as you would have in a local bank that offers FDIC protection for accounts.
These financial institutions are able to offer you higher interest rates because they have lower overhead. They may require membership and there may be limits for total saving amounts, withdrawal access, and protection amounts. In general, they are very competitive with regular banks.
2) If you put your money into the stock market, bonds, mutual funds or other opportunities to gain higher returns on your investment, you will incur greater risk of possibly losing your money due to causes beyond your control. These investments, as a rule of thumb, are not protected and you could lose it all.
It’s almost like the race between the tortoise and the hare. The slow moving tortoise was steady and on course to win the race. The hare was flashy and fast, but was diverted from the finish line. No matter which financial tool you decide to invest in, remember that unless there is protection against loss, your money is all at risk.
There are other factors to consider when making savings investments, such as your age, income, years to retirement, family matters, and so forth. Be sure to consult with a licensed financial advisor before making drastic changes in your savings plans.
What are your tips on best ways to save money?
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